J.C. Penney Will Get Boost From New Home Areas, CEO Says

J.C. Penney Co. Chief Executive Officer Mike Ullman said during an interview yesterday, “People said that it was too pricey, it’s not promotional.” Photographer: Andrew Harrer/Bloomberg

June 7 (Bloomberg) -- J.C. Penney Co., the department-store
chain seeking to rebound from its worst sales year in more than
two decades, will get a boost from the opening of renovated
housewares sections this month, Chief Executive Officer Mike
Ullman said.

For any doubts about whether its shoppers will embrace new
lines like $60 toasters from architect Michael Graves or pay
$1,695 for a chair from Happy Chic by Jonathan Adler, Ullman
points to Sephora. People had the same concerns about the
cosmetics brand when he introduced it to the chain in 2006
during his first stint as CEO.

“People said that it was too pricey, it’s not
promotional,” Ullman said yesterday in an interview at an event
in New York to introduce the new home department. They said
“the customer isn’t going to understand it. Now it’s the most
profitable part of the store.”

Ullman, 66, who took back the CEO job in April when his
predecessor, Ron Johnson, was ousted after 17 months in the job,
is trying to win back customers who left in droves during
Johnson’s tenure. Johnson alienated longtime shoppers by axing
most discounts and diminishing or removing house brands in favor
of more youth-oriented labels like Joe Fresh.

The housewares department with areas dedicated to brands
like Martha Stewart will be in about 500 of the chain’s 1,100
stores and are the biggest piece of Johnson’s plan to be
implemented.

The new wares are likely to resonate with shoppers in
stores after sales of the products online over the past two
months were encouraging, Ullman said.

Second Turn

The returning CEO started his second turn at J.C. Penney by
taking out a $2.25 billion loan and borrowing $850 million from
the retailer’s credit line to help shore up its finances. Now
he’s made his top priority attracting more shoppers to stores
and getting them to buy more when they visit.

To increase store traffic, the Plano, Texas-based
retailer’s advertising now focuses on promotions that have an
expiration date to create a sense of urgency that was absent
under Johnson. Once shoppers arrive, the company is betting that
the return of several house brands, including St. John’s Bay,
will get them to buy more.

Johnson originally planned to build 100 branded shops
within 700 of J.C. Penney’s outlets to transform them into what
he called specialty department stores. His rationale was that
specialty chains like Gap Inc. and Williams-Sonoma Inc. had been
taking market share from department stores for decades. Johnson
took it as a signal that people preferred to shop at smaller
chains in their local mall and so decided on building a sort of
mall inside J.C. Penney.

Revamped Departments

Only eight of Johnson’s shops were completed by the time he
left the company. The opening of the revamped home departments
will add 20 more dedicated to brands and categories such as
sleep.

Ullman served as J.C. Penney’s chairman and CEO for about
seven years before Johnson, 54, took over.

In the year ended Feb. 2, sales plunged 25 percent to $13
billion, the lowest since at least 1987. In the quarter ended
May 4, the company’s loss widened to $348 million from $163
million a year earlier.

During Johnson’s tenure, which began on Nov. 1, 2011, the
stock dropped 50 percent.

J.C. Penney slipped less than 1 percent to $18.15 at the
close in New York yesterday. The shares have gained 14 percent
since Ullman’s return on April 8.